Tariff calculation for a coal-fired IPP power project in Vietnam

The method of pricing an electricity power purchase agreement (PPA) is regulated under Circular 56 of the Ministry of Industry and Trade (MOIT) dated 19 December 2014, as amended (Circular 56/2014). Circular 56/2014 will govern PPA of (i) power plants which are not multi-target strategic hydroelectric plants (nhà máy thủy điện chiến lược đa mục tiêu), independent BOT power plants, power plants using renewable energy, and (ii) power plants without a separate mechanism issued by the MOIT.

The unit price in general is comprised of the following component:

Unit Price = Fixed Capacity Price + Fixed O&M Price + Fuel Price + Main Fuel Transport Price

Of which:

  • Fixed Capacity Price is a fixed number which is pre-determined throughout the entire economic life of the project. Fixed Capacity Price is calculated so that the internal of return of the power plant project will not exceed a regulatory rate (i.e. 10% or 12% depends on each case).                        

  • Fixed O&M Price is the fixed operation and maintenance price, which is the aggregate of (i) fixed price for major repair, equipment and service costs; and (ii) fixed price for employment costs. A change in inflation will be reflected in the calculation of the electricity price. However, the change is capped at 2.5% per year which is lower than the normal annual inflation rate in Vietnam.

  • Fuel Price is a variable number which is the aggregate of coal price component, DO fuel price component, limestone price component, miscellaneous price component (if any).

  • Main Fuel Transport Price is a variable number depending on the contract year transport price (if any).

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Written by Nguyen Quang Vu On In ,

Are Land Use Rights Considered As Immovable Properties Under Vietnamese Law?

Under the current law of Vietnam, it is possible that “land use rights” (quyền sử dụng đất) are considered “immovable properties”. The following arguments support the view that land use rights are immovable properties under Vietnamese law:

  • Land use rights (LUR) are property rights (quyền tài sản), which is a property (tài sản). Properties are divided into movable properties (động sản) and immovable properties (bất động sản). Immovable properties are defined to include: (i)  Land; (ii) House and construction work attached to land; (iii) Other properties attached to land, house or construction works; and (iv) other properties as stipulated by law.

  • Regarding item (iv) above, LURs are stipulated under Article 5.4 of the Law on Real Estate Business 2014 as types of “immovable properties made available for trading” (bất động sản đưa vào kinh doanh). This view is also adopted by Dr. Do Van Dai in his book on Civil Code 2015.

  • Regarding item (iii), Dr. Nguyen Minh Tuan considers LURs being immovable properties because they are “properties attached to land”.

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Written by Nguyen Quang Vu On In

Classifying business lines under VSIC and Provisional CPC

Under the current forms applicable to investment procedures to obtain an Investment Registration Certificate or a registration of an acquisition by a foreign investor, the foreign investor and the target company must specify the business lines of the target company according to both Vietnam Standard Industrial Classification (VSIC) and Provisional Central Product Classification (Provisional CPC). The VSIC is based on the International Standard Industrial Classification, not the Provisional CPC. Therefore, there might be some discrepancies among the scope of services under the VSIC and the Provisional CPC. In other words, when registering business lines, foreign investors might face the issue where the scope of a class under one classification might not be covered by a corresponding one under the other classification.

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Written by Nguyen Quang Vu On In ,

Controlling of conflicts of interest in public companies and credit institutions under the Vietnamese Anti-Corruption Law 2018

The new Anti-Corruption Law 2018 expands to regulate anti-corruption practices in private sectors and includes a new mechanism on controlling conflict of interests. For private sectors, the provisions on controlling of conflict of interest under Anti-Corruption Law 2018 apply to, among other things, public joint stock companies, and credit institutions. It appears that other private companies are not subject to the provisions on controlling of conflict of interest under Anti-Corruption Law 2018.

Under the Anti-Corruption Law 2018, conflict of interest means a situation where the interest of a company official or his/her relative have or likely to have an influence on performance of such official’s duties. Company officials who may be subject to the rules on conflict of interest under the Anti-Corruption Law 2019 include:

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Written by Nguyen Quang Vu On